Sinofsky's Exit Points To Major Microsoft Shakeup

Let's get one thing straight. Even if Steven Sinofsky, unlikely as it seems, really did intend all along to quit as head of Microsoft's $18 billion Windows unit less than a month after launching Windows 8, the suddenness of his departure wasn't part of that plan. Something happened, and he jumped -- or was pushed.

The prevailing wisdom is that Sinofsky left, or was let go, because he is not possessed of the collaborative spirit that Microsoft will need going forward to build a truly integrated ecosystem, one in which Windows 8 is the glue that binds PCs, tablets and smartphones and connects them to the cloud.

That may be true, but if it was the only reason behind Sinofsky's hasty exit then the official statement would have been something along the lines of, "Steven Sinofsky has decided to step down from his responsibilities blah blah blah, following a transition period of six months. Microsoft is conducting a search of internal and external candidates blah blah blah."

That's not what we got. Instead, Microsoft on Monday said Sinofsky is gone, EFFECTIVE IMMEDIATELY, and there is no new Windows division head. His responsibilities will be split between two execs. Windows planning head Julie Larson-Green becomes head of Windows software and hardware engineering, while chief marketing officer Tami Reller takes on the additional role as head of Windows business.

Former Windows Phone boss Andy Lees, meanwhile, was named head of corporate development and strategy.

Something went down in Redmond, and it went down quick. Otherwise, the company, in deference to customers, shareholders and its own employees, would have announced a more gradual transition atop its most important business unit. The suddenness of the move sent the company's stock down more than 3% Tuesday.

I'm not the only one who believes that this was in no way a planned event.

Former Microsoft engineer Hal Berenson noted this on his blog: "It's pretty clear from what was said, and not said, in the Steve and Steven emails that this wasn't some well planned corporate transition," wrote Berenson.

"It sounded abrupt, like the two of them met earlier in the day with Steven announcing his departure. A friend with experience serving on public company boards of directors was irate over how this was handled, feeling like modern corporate governance practices demanded a more planful transition. I agree, and it is just one more indication that this move was probably an outgrowth of conflict," said Berenson.

So what happened? The only two people who know for sure are Ballmer and Sinofsky. Since they're not saying anything beyond platitudes, here's my take. With the Windows 8 launch out of the way, Ballmer and Sinofsky met, possibly over the weekend, to discuss Sinofsky's future, and it didn't go well. It's possible Sinofsky, age 47, wanted a significantly expanded role at the company going forward, perhaps even a guarantee that he would be named CEO after Ballmer, age 56, eventually steps down, and was dismissed out of hand. And so he quit summarily

There are signs that Sinofsky's star had waned to the point where he was no longer in consideration for the top job.

Office chief Kurt Delbene, who in the last fiscal year helped spearhead Microsoft's acquisition of Yammer, got 125% of his bonus. Sinofsky oversaw the launch of Windows 8 and Surface, but only got 90% of his bonus -- in part because of a major foul-up that could end up costing Microsoft billions. To fulfill an EU antitrust settlement, the company was to have included a so-called Browser Choice screen on Windows 7. They, um, forgot. The penalties could reach as high as $7.4 billion.

It's also possible Ballmer unveiled a significant shakeup plan to his top lieutenants, who would also include CFO Peter Klein, COO Kevin Turner and interactive entertainment chief Don Mattrick, and Sinofsky didn't like where he fit in. "He may have felt that he was no longer in control of everything," Wells Fargo software analyst Jason Maynard noted, during a phone conversation.

The latter is a strong possibility, as I'm expecting a major restructuring of Microsoft next year. For reasons I spelled out last week, I believe the company will take the full plunge into hardware. Surface and a rumored self-branded Windows Phone are just the first steps. It follows that Microsoft may take a run at Nokia, which would bring Nokia CEO Stephen Elop back to Redmond. (Note that Microsoft issued $2.3 billion in notes last week, possibly to help fund acquisitions.) If such a scenario is in the works, Elop may also have eclipsed Sinofsky as a candidate for Microsoft's top job.

Even if Microsoft does not pull off a major hardware acquisition (Nvidia would be another logical target), I believe it's intent on becoming a seller of integrated systems that combine hardware and software, following the Apple model. That also may have led Ballmer and the board to decide that Sinofsky, a software guy, would not be the next CEO. They could be looking to Mattrick. His group has produced one Xbox-related hit after another, from the Xbox 360, to Kinect, to Halo, to the critically acclaimed, forthcoming Xbox SmartGlass.

There's another possibility behind Sinofsky's sudden departure: That Windows 8 sales out of the gate are a disaster. Ballmer over the weekend said sales of Surface were "starting modestly." Fine, but it may hardly be what the company was expecting after reportedly spending more than $1 billion to promote the new operating system.

What?You seem to be suggesting that MS needs to morph RT back into the standard Win8 OS. That was not the design purpose of RT. Otherwise, it wouldn't exist. It has both a Metro UI and a Desktop. But, the Desktop only runs new MS RT based programs. Not, legacy third party software. And, it likely never will. Again, by design. RT is a breakaway from the legacy environment. And, it has a fully functional Office platform pre-installed (and for free by the way).RT is not an "obstacle" that Sinofsky faced... as you put it. His obstacle was getting along with the rest of MS personnel. He might have been good at certain elements of his job but a team builder he was not.MS's biggest challenge is to reshape itself from a mangement perspective - to bring their various business entities into harmony with each other in order to be successful going forward.

1) Windows RT only supporting apps that run on top of the WinRT API except Office and IE.2) Office feels cobbled to Windows RT because you have to go back to the legacy desktop environment.3) He failed to listen to customers about the Start Button.

What he should have done IMHO:

1) Allow WinRT Apps to tap into other APIs, even if they are a subset for performance reasons so that all applications should be able to perform just is well as a Windows 8 app as they did as a Windows 7 app. Don't open up anything that they don't need to, but applications like Office, IE, other browsers, video editing, and gaming should have the same performance.2) Because of changes to API's available in 1) above, rewrite or port the Office apps as WinRT apps and include at least a basic macro language that only can work within the Office files (not be a security issue to the OS).3) Simply have a visual indicator at the bottom of the screen on the desktop for the Start Screen. Also, make Alt-Tab cycle through all open Desktop, Windows 8 apps, desktop, and start screen (maybe have options that determine what you cycle through).

Then anti-MS-fanboys/bloggers will have almost nothing to critisize an otherwise great Windows 8 OS about! 3) is easily fixable in a Windows Update package. 1) is fixable with the Blue version due out next summer. And three would now have to wait until the next version of Office.

I'm sorry to say that my first reaction to the Windows 8 interface was, "What?!!! They call this progress?" I've been a loyal Windows supporter for years, but Windows 8 is another one of those releases, while heralded by Microsoft, will be slow to be adopted by businesses. I've been so pleased with my Android device (Samsung tablet) that I'm not even interested in looking at the new Microsoft Surface particularly if it uses the Windows 8 interface.

I believe that MS is in trouble, for now. As usual, there will be the shake-up, the rattle, and then the rollout of the MS Windows 9!

Elop was a software guy when he left Microsoft, but now has CEO experience at a worldwide company that does both hardware and software. Mattrick because the Xbox brand has been a sensational hit in the consumer market, and that is where Microsoft needs to make inroads.

Elop? Mattrick? Elop was a pure software sales guy before he moved to the still fading Nokia. Why would he be in contention? Makes no sense. He's being severely criticized for the way he's handling nokia's problems, and may not last more than a few more months there. And Mattrick, well, I hate to say it, but the Entertainment Division hasn't been a roaring success. Since the first XBox, it's lost about $9 billion; losses that are continuing, despite the attempt to conceal them by merging the division with the Small Devices division (keyboards, mice, etc) which has always made a good profit.

If these two guys are Microsoft's best choice for the next generation, then they have serious problems.